Re: PHUN update re Buckskin Testing
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Falcon is a global energy company with projects in Hungary, Australia & South Africa
Developing large acreage positions of unconventional and conventional oil and gas resources
Message: Re: PHUN update re Buckskin Testing
These results could be the end of PetroHunter. Falcon will have a lot of explaining to do if they go ahead with the Buckskin deal...and if they don't, PHUN will be PHINISHED.
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As a result of severe cash flow constraints, we have experienced substantial difficulties in meeting our short term cash needs, particularly in relation to our past due vendor commitments. Substantially all of our assets are pledged, and extreme volatility in energy pricing and a deteriorating global economy are creating great difficulties in the capital markets and have greatly hindered our ability to raise debt and/or equity capital. Further, as the result of a series of asset sale transactions, we no longer have significant proven reserves, which increases our difficulties in obtaining traditional financing. During the year ended September 30, 2008 we have also obtained debt financing from related parties which we expect will not continue on any meaningful level in the near future. Although we have made substantial progress in reducing our reported $37.9 million dollar working capital deficit as of September 30, 2007, substantially all of our current assets are concentrated in marketable equity securities we received in conjunction with the sale of a 50% working interest in certain of our Australian assets. Those securities have experienced a dramatic decline in value and remain highly volatile. Further, some of these securities remain restricted from our use. Finally, we continue to have significant lease commitments and drilling obligations to meet, along with an absence of any meaningful revenue and continue to experience a significant operating cash burn rate. These and other risks we are facing may cause us to experience material adverse business consequences, including our inability to continue in existence.
We will have difficulty meeting our short-term cash commitments.
As of September 30, 2008, we had significant contractual obligations to meet certain drilling commitments during our fiscal year ending September 30, 2009, aggregating $25.8 million. We plan to raise additional funds to meet these obligations by selling debt and/or equity securities, by selling our marketable equity securities, or by entering into farm-out agreements or other similar types of arrangements. Financing obtained through the sale of our equity will result in significant dilution to our shareholders. We have granted security interests in our assets to lenders, industry partners and holders of our debentures which limits our ability to sell debt securities since they will be subordinated to our other security interest holders. As of January 2009, substantially all of our assets are pledged. The existence of security interests in our assets restricts our ability to sell those assets. We may be forced to sell assets below market value, and therefore we may not realize the market value or even the carrying value of those assets upon their disposition.
On December 30, 2008, we sold our only revenue producing natural gas properties to a third party in order to address our immediate cash needs. As a result, our ongoing cash burn rate has increased, and our overhead structure remains high, in light of our lack of production revenue.
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